In a realignment of regional aircraft production rates, Bombardier (BBD) is reducing its production of the CRJ700/900 in favor of increasing Q400 rates and will make a decision before the end of its fiscal year on January 31 whether to revive the $2 billion CSeries program it tabled earlier this year. In addition, it will also decide in the next few months on whether to produce a 98- to 100-seat stretch of the 86-seat CRJ900, a $300 million plan known as the CRJ900X.

Spokesman Mark Duschene said the potential launch of the CSeries and 900X are not linked to the decisions to curb its smaller regional jet production. The company sees a global market for 5,000 aircraft seating 100-135 passengers in the next 20 years and may seek a partner for the venture including Russian, Chinese and Indian aerospace companies.

Research Capital Analyst Jacques Kavafian told Reuters that current aircraft types in that range are uneconomical and Boeing and Airbus have had difficulty addressing that market. He pointed out no other airframer has developed an aircraft for the market. The company's board requires 50 to 100 aircraft sales to launch the program.

The company put the CSeries on hold earlier this year citing poor customer demand after two years of planning, research and marketing and $100 million investment. However, it continued to fund a team of 50 to refine a business plan for the aircraft with a $20 million budget. (RAN, February 6, p.1) Analysts, including BACK Aviation Solutions Tulinda Larsen indicated that any new aircraft, including the CSeries, would require a major cost savings. The operating economics would then drive the decisions and allow airlines to replace their relatively young 100- to 140-seat aircraft sooner. Larsen questioned whether the CSeries could obtain the necessary benchmark of a 15 percent cost savings over any other aircraft, as Bombardier had been promising.

Teal Group Analyst Richard Aboulafia said at the time the program was tabled that the CSeries brings no paradigm shift to the market and it would be fighting well-established competitors including the Boeing 717 and Airbus 319.

RJ Production Drops, Q-Series Up

While it will maintain its ultimate production rates for 2006/07, Bombardier regional aircraft will produce a different product mix. The move reflects current market demand, the company said, and means 1,330 Montreal- and Belfast-based employees, including management, will lose their jobs over the next nine months. The bulk will come from line personal but includes 200 managers and other salaried employees in Canada.

"The restructuring of the airline industry continues, with relatively few orders for regional jets in the 70- to 90-seat jet category," said Bombardier Aerospace President and COO Pierre Beaudoin. "This situation should improve...however, we must be prudent and manage proactively our CRJ700/900 jets in the short term to ensure...increased profitability and our success in the long term." He pointed to recent orders for the two RJs logged from Northwest (NWACQ) and My Way airlines as well as Q400 orders from Frontier (FRNT) and Luxair.

Instead of producing one aircraft every three days for the CRJ700/900, it will produce one aircraft every five days for a total of 65 deliveries in the current fiscal year ending January 2007 and approximately 50 deliveries in the next fiscal year, ending January 31, 2008. Severance costs will total US$31 million. The Q-Series, which includes the Q200/300/400, began its increase in production this month and will result in a total of approximately 50 Q-Series in the current fiscal year and 65 in the next fiscal year. The action means increasing the workforce at its Toronto facility to 800.

Corporate Shuttle Program Expands

In separate news, Bombardier announced the expansion of its corporate shuttle program by joining with Aerodynamics Inc (ADI) to provide one-stop fleet management for its corporate shuttle aircraft customers in the U.S. ADI, the largest contract operator of corporate shuttles in the U.S., and Bombardier will offer an innovative turnkey solution for companies interested in developing a corporate shuttle program, without operating their own flight department or integrating the aircraft into their existing fleet operations.

Under the agreement, Bombardier's corporate shuttle customers can contract with ADI for day-to-day aircraft management services, flight crews, security, aircraft handling and maintenance, scheduling, ground transportation and customized catering and entertainment as well as access to revenue-generating charter opportunities.

ADI currently manages up to 38 daily shuttle flights for Fortune 100 customers, achieving an annual passenger volume of nearly 200,000 on 8,000 flights. It operates a range of business jets, and jet and turboprop airliners and holds a Part 121 Certified Corporate Airlines certificate to operation Airbus A319 aircraft.